Category Monetary policy
The Loanable Funds and other theories
This is a long and boring post. (Though some will no doubt find it highly controversial, and a very few might even get over-excited). It might be useful for economics students who want to put the Loanable Funds theory into perspective. They are my main intended audience. And maybe for those who teach them too. […]
Why does repo exist?
Today's dumb question from the back of the Finance class. (But I would guess some other students might not know the answer either, and some maybe hadn't even thought of the question). [Update: just to be explicit, I am not asking why lenders want security for loans. I am asking why I don't sell my […]
Whatever happened to Price Level Path Targeting?
Before the recession, Inflation Targeting was the Champ, and Price Level Path Targeting was the Challenger. A strong Challenger. The Champ was the champ, but the Challenger had a lot of support. A lot of people thought he should and eventually would replace the Champ. People argued about who was better overall, but all agreed […]
Wot about the capitalists?
I just read Matt Yglesias "Monetary policy complacency is the conventional wisdom" (HT RA of The Economist) piece in Slate. It's depressing reading. "On one team are the leaders of the Federal Reserve, the European Central Bank, the Bank of Japan, and the Bank of England. Alongside them are the political leaders of the United […]
New Keynesian vs Neo-Wicksellian macroeconomics
I am not going to disagree with Simon Wren-Lewis. There is a lot of merit to his perspective on what New Keynesian macroeconomics is really about. But I want to put forward a very different perspective that I think also has a lot of merit.
Why are (almost all) economists unaware of Milton Friedman’s thermostat?
I know I'm right in saying that Milton Friedman's thermostat is an important idea that all economists ought to be aware of. And I'm pretty sure I'm right in asserting that almost all economists are unaware of this important idea. Am I wrong? Are you aware of this idea? Maybe under some other name?? Google […]
Kill the Euro now?
It's an ugly thing to say, especially since the end of the Euro will be an ugly thing. But it needs to be said. Back in June, Canada came under pressure to help the Eurozone survive, and came under criticism for failing to help (or failing to help enough). Canada's position was defensible on many […]
How many monetary transmission mechanisms are there?
An economic historian builds a macroeconomic model to help her understand the gold standard. Her model says the central bank sets the dollar price of gold, and the stock of base money is demand-determined. If the central bank raises the dollar price of gold, her model says this will cause an increase in the general […]
Worrying about the Canadian housing market, Part 3: Risks of default
Concerns about the housing market are not really about what happens to the market for houses per se; its role as a driving force for the recovery was done long ago. The real concern is the risk is a US-style financial crisis. I think it's a valid concern, but I don't think it's very likely. UWO's […]
Worrying about the Canadian housing market, Part 2: The effects of higher leverage
In a previous post on the housing market, I noted that we were unlikely to see the sorts of interest rate increases that would generate increases in mortgage payments of the size we saw in the early 1980s (up to 60%). And it's a good thing too, because most new homeowners are not as able […]
Worthwhile Canadian Initiative 
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